Deputy Commissioner of Income-tax,Circle-8, Nagpur V. Shri. Manjunath Satyanarayan Hiremane, Nagpur

ITA 187/NAG/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9645 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 21-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND BHUSARI; K JOHN VIKRAM
• Assessee Lawyers: SURESH TOLANI
• Keywords: Revised return
• Section: 143(3)

Judgement Text

ITA NO. 187/NAG/2010 MANJUNATH SATYANARAYAN HIREMANE, NAGPUR IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH , NAGPUR BEFORE: SHRI P.K. BANSAL , ACCOUNTANT MEMBER AND SHRI D.T. GARASIA , JUDICIAL MEMBER ITA NO. 18 7 / NAGPUR / 20 10 ASSESSMENT YEAR : 2005 - 06 DCIT, CIRCLE - 8 NAGPUR VS. MANJUNATH SATYANARAYAN HIREMANE NAGPUR (APPELLANT) (RESPONDENT) PAN NO. AAQPH 3020D APPELLANT BY: SHRI K. JOHN VIKRAM, JCIT & DR. MILIND BHUSARI, CIT(DR) RESPONDENT BY: SHRI MANOJ MORYANI, ADVOCATE & SHRI SURESH TOLANI, ADVOCATE DATE OF HEARING: 17.10.12 D ATE OF PRONOUNCEMENT: 19.10.12 ORDER PER P.K. BANSAL, ACCOUNTANT MEMBER: - THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) DATED 29 .10.2010 DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT. 2. THE BRIEF FACTS OF TH E CASE ARE THAT THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED DISALLOWING THE EXPENSES INCURRED ON WAGES AMOUNTING TO RS.38,06,500/ - . THE PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED. THE ASSESSING OFFICER DID NOT AGREE WITH THE EXPLANATION OF T HE ASSESSEE BUT LEVIED THE PENALTY U/S 271(1)(C) . WHEN THE MATTER WENT BEFORE THE CIT(A), THE CIT(A) DELETED THE PENALTY BY OBSERVING AS UNDER: APPELLANT VIDE HIS WRITTEN SUBMISSIONS DATED NIL HAS ALSO STATED THAT THE FINDING IN THE ASSESSMENT ORDER CA NNOT BE AUTOMATICALLY ADOPTED TO LEVY PENALTY. IT IS AN ESTABLISHED LEGAL POSITION THAT PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS AND PENALTY CANNOT BE LEVIED MERELY RELYING UPON THE FINDINGS IN THE ASSESSMENT ORDER. A.O., IN THE LIGHT OF THE FACT THAT THE APPELLANT HAD AGREED TO THE ADDITION, SHOULD HAVE ENSURED THAT IN THE ORDER OF LEVY OF PENALTY ENOUGH MATERIAL IS AVAILABLE AND THAT THE ORDER IS SELF CONTAINED SINCE THE A.O. HAS POWERS TO GATHER ADDITIONAL MATERIALS BY MAKING FURTHER ENQUIRIES. IT IS SEEN THAT THE A.O. HAS TREATED THE PENALTY PROCEEDINGS AS A MERE CONTINUATION OF THE ASSESSMENT PROCEEDINGS AND HAS NOT TAKEN EFFORTS TO SUPPORT THE FINDINGS IN HIS ORDER. THE DUTY OF THE A.O. TO ITA NO.187/NAG/2010 MANJUNATH SATYANARAYAN HIREMANE, NAGPUR 2 CONSIDER THE MATTER AFRESH INDEPENDENTLY IS POINTED OUT BY VARIOUS DECISIONS WHICH ARE REPORTED IN RATANLAL RAMPRASAD VS. CIT 139 ITR 64(M.P.) AND CIT VS. LAKRAJ & SONS 237 ITR 418 (MAD.). THIS IS A CASE WHERE THE APPELLANT HAD AGREED TO THE ADDITION AT THE STAGE OF THE ASSESSMENT PROCEEDINGS AND THE A.O. WITHOUT ANY DETAILED DISCUSSION ON THE MATTER HAS ACCEPTED THE MATTER. IN THE LIGHT OF THE ABOVE PROPOSITIONS AND IN VIEW OF THE FACT THAT THE A.O. HAS NOT BROUGHT IN ANY RELEVANT MATERIAL IN THE PENALTY PROCEEDINGS, I AM UNABLE TO SUSTAIN THE LEVY OF PE NALTY. IN THE CASE OF SUDARSHAN SILK SAREES VS. CIT 300 ITR 205, THE HON BLE SUPREME COURT HAS HELD THAT WHEN THERE WAS A FINDING OR FACT THAT ASSESSMENT WERE MADE ON THE BASIS OF ESTIMATED INCOME DISCLOSED BY THE ASSESSEE IN THE REVISED RETURNS RATHER T HAN ON THE BASIS OF INCRIMINATING MATERIALS FOUND DURING THE SEARCH, PENALTY U/S 271(1)(C) WAS NOT EXIGIBLE. I, THEREFORE, HOLD THAT THE LEVY OF PENALTY IS UNJUSTIFIED AND THE PENALTY IS HEREBY DELETED. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY CONSIDERED THE SAME. WE HAVE GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW. WE NOTED THAT IN THIS CASE, THE ADDITION HAS BEEN MADE MERELY ON ESTIMATE BASIS. WE NOTED THAT THE ASSESSING OFFICER HAS LEVIED THE PENALTY BY OBSERVING THAT IT IS CLEAR THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME AND FURNISHED INACCURATE PARTICULARS OF THE INCOME. 4 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH PARTIES AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDER OF THE AUTHORITIES BELOW. SEC TION 271 (1)(C) READS AS UNDER: - 271 (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) [OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) .. (B) .. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, OR (D) .. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY, - EXPLANATION 1 - WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS A CT, - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE AO OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND [FAILS TO PROVE SUCH EXPLANATION IS BONA FIDE AND THAT ITA NO.187/NAG/2010 MANJUNATH SATYANARAYAN HIREMANE, NAGPUR 3 ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM], THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT T HEREOF SHALL, FOR THE PURPOSES OF CLAUSE OF THIS SUB - SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 5 . FROM THE PERUSAL OF THE AFORESAID SECTION, IT IS APPARENT THAT PENALTY U/S 271 (1)(C) IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF THE INCOME. THIS IS THE SETTLED LAW THAT THE PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDIN GS ARE DIFFERENT. THE PENALTY PROCEEDINGS CAN BE INITIATED ON 2 CHARGES I.E. I) CONCEALMENT OF PARTICULARS OF INCOME AND II) FURNISHING OF INACCURATE PARTICULARS OF INCOME. BOTH THE CHARGES ARE ENTIRELY DIFFERENT. IF THE PROCEEDINGS ARE INITIATED ON CHARGE OF CONCEALMENT, THEN PENALTY CANNOT BE LEVIED ON THE CHARGE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AND VICE VERSA. THUS, THERE MUST BE A CLEAR FINDING ABOUT THE CHARGE FOR WHICH PENALTY IS IMPOSED OR INITIATED. IT IS INCUMBENT UPON THE AO TO ST ATE WHETHER PENALTY WAS BEING LEVIED FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE ABSENCE OF SUCH FINDINGS, THE ORDER WOULD BE BAD IN LAW. THE CASE OF NEW SORATHIA ENGINEERING CO. LTD., 282 ITR 642, HON BLE GUJARA T HIGH COURT HAS HELD AS UNDER: - IT IS INCUMBENT UPON THE ASSESSING OFFICER TO STATE WHETHER THE PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF INCOME HAD BEEN FURNISHED BY THE ASSESSEE. HELD, THAT THE PENALTY ORDER AND THE ORDER OF THE COMMISSIONER (APPEALS) SHOWED THAT NO CLEAR CUT FINDING HAD BEEN REACHED. THE TRIBUNAL HAD FAILED TO APPRECIATE THIS LEGAL ISSUE. THE RATION IN CIT V. MANU ENGINEERING WORKS 132 ITR 306 (GUJ) WAS APPLICABLE AND THE ORDER OF PENALTY COULD NOT BE UPHELD BY THE TRIBUNAL. THE ORDER WAS INVALID. 6 . IN THE CASE OF COMMISSIONER OF INCOME TAX V. RAJAN AND CO. 291 ITR 340 (DEL), IT IS HELD THAT THE PROVISION OF SECTION 271 (1) (C) OF THE INCOME TAX 1961 WOULD REQUIRE PROPER APPLICATION OF MIND AND RECORDING OF AT LEAST A BARE MINIMUM OPINION ON THE PART OF AO THAT A CASE FOR INITIATION OF PENALTY PROCEEDING WAS MADE AS THERE WAS CONCEALMENT OF INCOME OR THAT INCORRECT PARTICULARS HAD BEEN FURNISHED BY THE ASSESSEE WITH THE INTENTION TO AVOID ITA NO.187/NAG/2010 MANJUNATH SATYANARAYAN HIREMANE, NAGPUR 4 PAYMENT OF TAXES. AO HAS NOT MADE OUT ANY CHARGE EITHER OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 7 . THE PENALTY U/S 271(1) (C) CAN BE LEVIED FOR EITHER OF THE CHARGE . THE PENALTY ORDER SIMPLY STATES THAT PENALTY IS ATTRACTED ON THIS ADDITION AS IT IS MANDATORY AND AUTOMATIC. IT DOES NOT STATE FOR WHAT DEFAULT PENALTY IS LEVIED S. 271(1) (C) (III) IS EXPRESSLY CLEAR THAT THE PENALTY CAN BE LEVIED FOR CONCEALMENT OF PAR TICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS THE PARTICULARS OF INCOME WHICH IS THE COMMON SUBJECT MATTER OF BOTH THE CHARGES. THE WORD CONCEAL AS PER WEBSTER S DICTIONARY MEANS TO HIDE, WITHDRAW, OR REMOVE FROM OBSERVATIO N; COVER OR KEEP FROM SIGHT; TO KEEP SECRET; TO AVOID DISCLOSING OR DIVULGING. THAT MEANS NON DISCLOSURE OF PARTICULARS OF INCOME. ON THE OTHER HAND, WHERE PARTICULARS ARE DISCLOSED BUT SUCH DISCLOSURE IS NOT CORRECT, TRUE OR ACCURATE, IT WOULD AMOUNT TO F URNISHING OF INACCURATE PARTICULARS OF INCOME. FOR EXAMPLE, IN CASE OF BUSINESSMAN, IF A PARTICULAR TRANSACTION OF SALE IS NOT SHOWN IN THE BOOKS, IT WOULD AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME WHILE SALE IS SHOWN BUT AT A LESSER VALUE, IT WOULD A MOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 8 . IN OUR OPINION, EXPLANATION 1 TO SECTION 271(1) (C) CANNOT BE APPLIED WHERE CHARGE AGAINST THE ASSESSEE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME SINCE IT PROVIDES A DEEMING FICTION QUA CONCEALMENT OF PARTICULARS OF INCOME ONLY AND CONSEQUENTLY CANNOT BE EXTENDED TO A CASE WHERE CHARGE AGAINST THE ASSESSEE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME. ON THE OTHER HAND, WHERE CHARGE AGAINST THE ASSESSEE IS CONCEALMENT OF PARTIC ULARS OF INCOME, THE AO HAS TO ESTABLISH EITHER THAT ASSESSEE HAS NOT DISCLOSED THE PARTICULARS OF INCOME UNDER THE MAIN PROVISIONS OR THE CASE OF ASSESSEE FALLS WITHIN THE SCOPE OF THE DEEMING FICTIONS CREATED UNDER THE EXPLANATIONS. FOR EXAMPLE, THE ASSESSEE MIGHT NOT DISCLOSE PARTICULAR SALES OR DIVIDEND INCOME OR INCOME FROM ANY SOURCE. SUCH INSTANCES WOULD FALL UNDER THE MAIN PROVISIONS ITSELF. IN SUCH CASES, THE BURDEN IS ON THE AO TO ESTABLISH THE EXISTENCE OF THE CHARGE ON THE BASIS OF MATERIA L ON RECORD. ITA NO.187/NAG/2010 MANJUNATH SATYANARAYAN HIREMANE, NAGPUR 5 9 . EXPLANATION 1 TO SECTION 271(1) (C) STATES THAT THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE SHALL BE DEEMED TO BE THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THIS DEEMING PROVISION IS NO T ABSOLUTE ONE BUT IS REBUTTABLE ONE. IT ONLY SHIFTS THE ONUS ON THE ASSESSEE. EXPLANATION 1 REFERS TO THE TWO SITUATIONS IN WHICH PRESUMPTION OF THE CONCEALMENT OF THE PARTICULARS OF INCOME IS DEEMED. IT IS NOT APPLICABLE WHERE THE CHARGE AGAINST THE ASSE SSEE IS FURNISHING INACCURATE PARTICULARS OF THE INCOME. THE FIRST SITUATION IS WHERE THE ASSESSEE IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION, WHICH IS FOUND BY THE AO OR TH E COMMISSIONER TO BE FALSE. THE SECOND SITUATION IS WHERE THE ASSESSEE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME OFFERS AN EXPLANATION, WHICH, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AND ALSO FAILS TO PROVE THAT SUCH EXPLANAT ION WAS BONA FIDE ONE AND THAT ALL THE FACTS RELATING TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THE PRESUMPTION AVAILABLE UNDER EXPLANATION TO SECTION 271(1) (C), CANNOT BE DRAWN UNLESS THE CASE OF THE ASSESSEE FALLS UNDER EITHER OF TH E CLAUSES (A) OR (B). 10 . IN THIS CASE, THE AO HAS NOT BROUGHT OUT ANY SPECIFIC CHARGE FOR WHICH THE PENALTY HAS BEEN IMPOSED ON THE ASSESSEE U/S 271(1) (C) OF THE ACT. HE HAS NOT BROUGHT OUT WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR WHETHER THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 1 1 . THE AO IN THIS CASE LEVIED THE PENALTY FOR BOTH THE CHARGES WITHOUT MENTIONING ANY SPECIFIC CHARGE. IN CIT V. ATUL MOHAN BINDAL (2009) 9 SCC 589, WHERE HON BLE SUPREME COURT WAS CO NSIDERING THE SAME PROVISION, IT OBSERVED THAT THE ASSESSING OFFICER HAS TO BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THUS THE SATISFACTION OF THE AO ABOUT THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME IS ESSENTIAL BEFORE LEVYING ANY PENALTY U/S 271(1) (C). THE AO AS IS APPARENT FROM THE PENALTY ORDER HAS NOT SATISFIED ABOUT THE CONCEALMENT OF PARTICULARS ITA NO.187/NAG/2010 MANJUNATH SATYANARAYAN HIREMANE, NAGPUR 6 OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. ON THIS BASIS ITSELF THE PENALTY DELETED. 1 2 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19.10. 20 1 2 SD/ - SD/ - ( D.T. GARASIA ) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS NAGPUR DATED 19 TH OCTOBER , 20 1 2 COPY TO 1 DCIT, CIRCLE - 8, NAGPUR 2 SHRI MANJUNATH SATYANARAYAN HIREMANE, F - 21, PLOT NO.16, VIJAY ARCADE, NORTH AMBAZARI R OAD, SHIVAJI NAGAR, NAGPUR 3 THE CIT - IV , NAGPUR 4 THE CIT (A) , NAGPUR 5 THE DR, ITAT, NAGPUR 6 GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL NAGPUR